UK FTSE posts 2nd weekly loss as Iraq strikes add to global gloom

Fri Aug 8, 2014 12:12pm EDT

(Updates with closing prices)

* FTSE 100 down 0.5 pct after hitting lowest point since mid-April

* Posts second straight weekly loss

* U.S. aircraft starts strikes against Iraqi militants

* Asset managers lead declines as investors fret about outflows

By Francesco Canepa

LONDON, Aug 8 (Reuters) - Britain's top equity index suffered a second straight weekly loss after falling on Friday, with U.S. air strikes in Iraq adding to an already gloomy geopolitical and economic landscape.

The blue-chip FTSE 100 index closed 30.01 points lower, or 0.5 percent, at 6,567.36. It was down 1.7 percent for the week, matching its fall in the previous week.

The index set its lowest mark since mid-April at 6,528.73 points earlier in the day before briefly trimming losses when a Russian official said Moscow would continue efforts to de-escalate the Ukraine crisis.

Traders said the FTSE could find buyers coming in if it fell to near 6,500 points, where it bottomed out in March and April.

"If we hammer out a base of support there and news flows ease, then I shall participate more in the recovery," said Ed Woolfitt, head of trading at Galvan.

U.S. aircraft dropped 500-pound laser-guided bombs on Islamic State artillery on Friday, only hours after President Barack Obama authorised air strikes to protect Christians and avert "a potential act of genocide".

The development added to worries about conflicts elsewhere in the Middle East and in Ukraine, which, together with weak European economic data and the prospect of monetary tightening in the United States, have knocked back global stock markets over the last month.

"I have backed off from buying on the dips at the moment, mainly because market moves are being fuelled by more geopolitical news and therefore harder to call and read than the technical, market-driven bounces," Galvan's Woolfitt said.

"I am keeping most of the powder dry and waiting to play the larger run back up once it has settled."

Asset manager Schroders, down 2.7 percent, led declines as investors worried that the market volatility would affect its performance and result in clients withdrawing money.

Mid-cap fund manager Henderson Group and hedge fund MAN Group fell 2.4 percent and 2.2 percent respectively.

U.S. funds investing in European equities suffered their longest streak of outflows in three years in the seven days to Aug. 6 as they bled money for the eighth consecutive week, Lipper data showed.

"The market is going down and these are heavily geared plays on the market," said Jason Streets, an analyst at Jefferies & Company.

"Not only are they linked to the market in terms of management fees, but flows tend to follow the market too." (Additional reporting by Sudip Kar-Gupta; Editing by Catherine Evans)